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Court-Ordered Meetings of Members

Montreal & Canadian Diocese of the Russian Orthodox Church Outside of Russia Inc. v. Protection of the Holy Virgin Russian Orthodox Church (Outside of Russia) in Ottawa Inc., a 2002 decision of the Ontario Court of Appeal, stands as the leading authority on court-ordered meetings of members of not-for-profit corporations, including charitable corporations.

1. Facts and Issues

This dispute involved a contest over the assets of The Holy Virgin Church. Two warring factions sought control of the church, which was incorporated as a non-share capital corporation under Part II of the Canada Corporations Act. At trial, the court ordered a meeting of the members of the corporation, stating that "it is impracticable to call a meeting of members in the manner prescribed in the Church By-laws as the authority of the Parish Council to call such a meeting and the status of members who could attend would in all likelihood be in issue".

This order was appealed to the Ontario Court of Appeal.

One of the issues on appeal was whether the trial judge properly exercised his discretion in ordering a meeting under the Act, which turned on whether it was for any reason "impracticable" to call a meeting of members.

2. Ruling

The Court of Appeal stated that courts interpret "impracticable" narrowly, ordering meetings of members (or shareholders in the case of for-profit corporations) only in exceptional circumstances. This narrow interpretation reflects the judicial policy of non-interference in internal corporate affairs.

The Court further found that the normal by-laws setting out the procedures for calling and holding a meeting had not been challenged and saw no confusion in the by-laws about the appropriate meeting procedures.

Instead, what the Court saw was a power struggle between two opposing factions. It applied the ruling it had made in a case involving a for-profit corporation to the effect that, except in extraordinary circumstances (which the Court found were not present in the case before it), the power to order meetings may not be invoked for the express purpose of placing in control of the corporation's affairs one of two or more contending factions among the members.

Accordingly, the court allowed the appeal and set aside the order for the meeting of members.

3. Key Observations

The Court of Appeal's ruling in Russian Orthodox Church is the leading authority on the exercise of judicial authority to order meetings of members of not-for-profit corporations. A court is to order a meeting only where it is, for any reason, impracticable to convene and hold a meeting in accordance with the corporation's articles, by-laws or other applicable constating documents. Where it is possible to call and hold the meeting in accordance with the applicable constating documents, the corporation, its directors and members, should be left to do so. The court's policy is to not intervene in the corporation's internal affairs, except in extraordinary circumstances.

Examples of situations where it may be impracticable to call a meeting in accordance with the corporation's constating documents could include:

● Inability to meet the quorum requirement for a meeting of members.

● Lack of membership records.

● Uncertainty over which by-laws are in force and, in particular, what the rules are for the admission of members.

● Rival or split boards, each purporting to control the corporation and to respond to any requisition of a meeting by the members.

In most cases, a valid meeting of members can be convened - either by the board or by requisition of members. A board is not essential to the process. Therefore, the lack of a quorate board is not a barrier to holding a meeting of members. The meeting of members can cure any vacancies on the board or reduce the size of the board to restore a quorum. A meeting of members can also confirm, amend or repeal any by-laws - thereby removing any uncertainty in the status of the by-laws and the rules governing subsequent meetings of members.

Providing sufficient notice of the meeting to members would also only rarely meet the impracticability threshold.

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